We should not underestimate the effect environmental issues are having on policy in China. For the last 20 years, the West has watched the growing industrialization in China achieved at the cost of massive environmental pollution.
Western firms have been forced to adhere to ever stricter environmental standards while steel, aluminum, cement and a host of other heavy industries in China, India and the developing world had been allowed to avoid or have flouted environmental standards saving them costs and hence allowed them to outcompete western firms.
Many may say it’s too little and too late, but finally environmental issues are becoming such a hot topic in emerging markets they are beginning to impact planning and public policy. A recent Financial Times article details how mass protests against a new aluminum plant, planned by the notorious Zhongwang Holdings (HK:1333), in the depressed Chinese oil town of Daqing near the Siberian border has forced a rethink. It’s not as if Daqing does not need the investment. Once a thriving oil town based on China’s largest and first major oilfield Daqing, in Heilongjiang province, is now facing a bleak future as the oil field is rundown. Zhongwang’s proposed CNY 46 billion ($6.7 billion) investment would bring jobs and a degree of prosperity but the local population fear the plant would pollute the city and water supply.
Unfortunately for protesters, the local city officials seem intent on the plant going ahead, and while they are paying lip service to a review the probability is they will allow protests to die down and then try to continue with the project. Menacingly the local Daqing government has threatened anyone who “slandered” Zhongwang, “spread rumors or upset society” with dire legal consequences.
Protestors probably have good reason to doubt their local government’s assurances that environmental demands will be met. According to Radio Free Asia two existing chemical plants in the town regularly pass the annual environmental tests yet still cause widespread pollution without any consequences.
Public process against developments which are feared to bring pollution are probably not yet at the stage where they will seriously impact further investment in aluminum, steel or other heavy industries but the growing level of public concern has not gone unnoticed in Beijing, and will undoubtedly result in tighter environmental standards both for future and current production facilities helping, in some small extent, to level the playing field for western producers having to compete against the emerging market producers who have historically avoided the costs of environmental regulation.
by Stuart Burns